Are you eligible for research and development credits?
The Government provides significant tax benefits to cover research and development. If your company is taking a risk innovating, improving or developing a process, product or service, then it can qualify for R&D tax credits. For instance, if you are developing financial software, up to 33.35% of your company’s R&D spend can be recouped.
Have you considered small self-administered pension schemes (SSAS)?
These schemes provide retirement benefits for company directors, senior staff, employees and even family members. Employers and members receive tax relief on contributions made, subject to certain conditions. Crucially, SSAS give employers great flexibility on where they invest the scheme’s assets and the ability to borrow money for investment purposes. You can even lend money back to the business or purchase the business’s shares.
Have you factored in changes to P11D benefits?
After HMRC introduced significant changes to employment tax rules on 6 April 2016, it is expected that P11D benefits will be completely removed. Benefits are continually changing (when not disappearing altogether) so it’s important to ensure you’re well informed and ready to implement the necessary adaptations ahead of time.
Do you have optimal relationships with contractors?
Are they engaging as self-employed? If so, you are responsible for payroll taxes in the event of any problem.
Are they engaging via their own limited company? In these cases the tax obligation falls on that company. This is normally the preferable option – but be wary of anything that could be classed as disguised employment.
Should they be treated as an employee? You will be liable for National Insurance Contributions (NIC) and payroll. This is is a complex issue that is far from resolved; fortunately the onus is on the individual to determine if they are self-employed.
Are your personal tax arrangements maximising your income?
Can you get returns as capital returns subject to 20% tax? It almost goes without saying that you should seek to minimise income tax, with an upper bracket of 45%, wherever it is compliant to do so.
Are you taking dividends over salary where possible to save on NIC? This used to be conventional wisdom, but as discussed earlier, HMRC is clamping down with changes from April 2016 effectively cancelling these benefits.
Do you have optimal pensions arrangements? Personal pensions are capped at £10K contributions for over £210K – offering limited appeal for high-net worth individuals – but it’s certainly worth investigating SSAS pensions (see above).
Are you up to speed with FRS 102?
FRS 102 is a new financial reporting standard for annual accounts. Mandatory for most UK entities, it aims to align UK reporting with International Financial Reporting Standards (IFRS). The standard applies to accounting periods commencing on or after 1 January 2015 – so its impact has already begun to be felt.
Straightforward businesses – those without complex financial instruments or investment properties, for example, are not affected by the new accountancy standard – but it significantly changes the way they compile and present their accounts.
FRS 102 requires more extensive policy disclosures and has implications for several activities, including leasing property, holiday pay accruals, long term loans to a company, business combinations, and revenue recognition.
The whole transition is a golden opportunity to review your accounting practices, especially when it comes to performance fees and management fees. There is judgement to be exercised here, so it’s worth getting professional advice in this area.
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